Maharashtra’s tax arrears have shot up to a staggering Rs 39,335 crore, which if realised could have not only wiped away its worsening fiscal deficit that loomed at Rs 30,965.26 crore for 2014-15, but left almost Rs 9,000 crore to spare.

Maharashtra’s tax arrears now stand higher than the cumulative amount the centre has estimated to distribute from union taxes and duties to 13 small and medium states this year.

After presenting an interim budget in February, Finance Minister Ajit Pawar presented “additional budget” on Thursday where spending was raised by another Rs 10,594 crore riding on expectation of an increase in central assistance to the state.
In February, Pawar had estimated a total expenditure of Rs 2,13,462 crore which was raised to Rs 2,24,056 crore. Apart from central assistance, the government would bank on open market borrowings of Rs 31,022 crore to meet additional expenditure. The interim budget had estimated borrowings at Rs 30,000 crore.

Disclosures on tax revenues raised but not realised in the budget document indicate that Maharashtra would have written off the entire fiscal debt had it managed to realise even 78 per cent of arrears. In 2013-14, the budget document further reveals, while tax collection grew by around 11 per cent, accumulated arrears rose by nearly 21 per cent.

The arrears could be a massive black hole for the government since budget disclosures reveal that the unrealised revenue for three in four such cases was first raised at least two years ago. About Rs 16,900 crore in taxes raised but not realised was outstanding for two-five years, whereas recovery of another Rs 12,600 crore was pending for five-ten years. Another 10 per cent arrears were pending for 10 or more years.

The Sales Tax department was the main defaulter with Value Added Tax and central sales tax accounting for over 94 per cent (Rs 37,073 crore) of the outstanding arrears. Recovery of Rs 759.37 crore in taxes on professions, trades, and employment was pending, whereas electricity duties accounted for Rs 414.62 crore, followed by Rs 358.22 crore land revenue.

With the state economy still trying to overcome recessionary forces, Pawar said the government would improve tax collection. His budget speech announced a decision not to grant stay on recovery of sales tax if appeals were filed beyond two years after the tax was raised.